Börsenlexikon: Cash-flow

Cash flow is a balance sheet indicator that allows conclusions to be drawn about a company's financing power. Cash flow is calculated from the sum of net income, depreciation and amortization, changes in long-term provisions, and taxes on income and earnings.

The flow of income or expenses that changes a cash account during a given period. Revenue streams usually arise from one of three activities - financing, operations, or investing - although in the case of personal finance, this also occurs as a result of donations or gifts. Cash outflows result from spending or investing. This is true for both business and personal finances. In both business and personal finances, cash flows are necessary for solvency. They can be presented as a record of something that has happened in the past, such as the sale of a particular product, or what is predicted for the future, thus representing what a business or person expects to take in and spend. Cash flow is critical to the survival of an entity. Having a large cash balance will ensure that creditors, employees, and others can be paid on time. If businesses or individuals do not have enough cash to support their operations, they are, as they say, insolvent and a likely candidate for bankruptcy should the insolvency continue.

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